Judge Clears Path for Trial in NCAA Antitrust Suit

Trial Could Force Sharing of Licensing Revenue With Student-Athletes Whose Images Are Used in Merchandise

By

Sam Walker

Updated April 11, 2014 10:29 p.m. ET

A federal judge cleared the way Friday for a trial in a class-action antitrust lawsuit that could force the National Collegiate Athletic Association to share billions of dollars in revenues with student-athletes whose images it uses in merchandise such as videogames.

In a 48-page ruling, U.S. District Judge Claudia Wilken denied motions for summary judgment by the plaintiffs and by the NCAA. She reaffirmed a trial date of June 9.

The judge also dealt a small but potentially significant blow to the NCAA's case by rejecting one of the organization's arguments for keeping the current arrangement with athletes. The ruling dismissed the notion that the NCAA's current rules—in which it doesn't share revenue from its licensing deals with the athletes—promote competitive balance by helping to "increase support for women's sports and less prominent men's sports."

For years, NCAA Division I member schools have operated under a business model in which one or two teams, usually top-level football and men's basketball teams, have generated enough revenue to support many other men's and women's teams that aren't profitable. The NCAA had argued that this is one of the reasons that the current arrangement is fair.

"The NCAA may not rely on this justification at trial," the ruling said.

Michael P. Lehmann, a lawyer for the players, said the plaintiffs are pleased with the ruling. "Nobody is going to be avoiding a trial," he said. Mr. Lehmann said the judge's order "limits the types of proof [the NCAA] can offer. That creates a disadvantage for them."

In a statement, the NCAA said it disagreed with the court's decision.

"The NCAA values and prioritizes all of its student-athletes regardless of whether their sport brings in revenue," it said. The organization also said it is committed to addressing areas to improve the current system of NCAA laws.

Earlier this year, both sides asked the court to decide some of the major antitrust issues in the case with a summary judgment ahead of a trial set for June.

Lawyers for the athletes pressed the argument that the NCAA conspires with its business partners in television and videogames to fix the price of an athlete's image and likeness at zero. Lawyers for the NCAA, meanwhile, offered several arguments for why the athletes' claims should be barred, including that the athletes don't have underlying broadcast rights.

The lead plaintiff in the case is Ed O'Bannon, a former basketball star at UCLA who works at a car dealership in Nevada. Mr. O'Bannon filed the suit in 2009 after he saw an avatar that looked like him depicted in an NCAA-branded videogame. He claimed it was unfair that the NCAA could license his image for a videogame or sell broadcast rights to games in which he played while prohibiting him from receiving any proceeds.

He is one of several former athletes who brought suit against the NCAA for a share of the revenue that results from the NCAA's and its member schools' agreements with TV networks and videogame makers.

Videogame maker EA Sports had been a defendant in the suit before settling out of court late last year by agreeing to pay $40 million to the plaintiffs. Between 100,000 and 300,000 people would be eligible to benefit from that settlement, with different levels of payouts for the various cases involved, said Steve Berman, an attorney for the plaintiffs. Current college players also would be eligible, Mr. Berman said.

Judge Wilken certified the case as a class action on Nov. 8, meaning all Division I men's basketball players and bowl-subdivision football players would be part of the suit unless they opt out. A week later, plaintiffs' lawyers moved for summary judgment in the case, seeking an expedited ruling.

The plaintiffs can't recover funds already lost, the judge ruled, so Mr. O'Bannon himself wouldn't receive any windfalls under the class action. But a successful suit could force the NCAA to change the way it does business and cut players in on burgeoning TV-rights deals. (The plaintiffs aren't seeking any athletic-ticket or donation funds.)

The money at stake is significant. The Pac-12 Conference has a 12-year, $3 billion, broadcast-rights contract with ESPN and Fox. The NCAA has a 14-year, $10.8 billion deal with CBS and Turner Broadcasting to air the NCAA men's basketball tournament. Every major college sports conference has its own such deals.

Last month, the regional director of the National Labor Relations Board ruled that Northwestern University scholarship football players are employees of the school and are eligible to form the nation's first college athletes' union. The ruling, which Northwestern appealed, has the potential to upend big-time college sports by reversing the NCAA's longtime stance that athletes are students first and athletes second.

NCAA president Mark Emmert said last week that the organization needed to change, but that a union of college athletes would be a "grossly inappropriate solution."

"It would blow up everything about the collegiate model of athletics," he said, adding that "no one up here believes the way you fix that is by converting student-athletes into unionized employees."

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